Start With Objectives, Then Match the Tools

Sophisticated planning begins with a short list of outcomes, not a long list of documents. Most clients want some combination of probate avoidance, control during incapacity, tax efficiency, creditor protection, and smooth administration for a surviving spouse or children. Each goal pushes you toward certain tools and away from others. A revocable trust can deliver continuity and privacy, yet it can also invite needless complexity when a client has modest assets or a simple distribution scheme. A will-only plan can work fine for the right profile, yet it often collapses under the weight of beneficiary designations and joint ownership that operate outside probate. The practical move is to choose a structure, then audit the entire asset map to confirm that the structure actually governs what matters.

Probate Avoidance Is an Asset-Mapping Project

Clients often treat probate as a document problem. In reality, probate exposure is largely a function of title. Attorneys who focus on the mechanics early reduce the risk of later surprises. Colorado’s probate process can be efficient when the estate is straightforward and uncontested, yet many families still prefer to avoid court involvement, delays in access, and public filings. Revocable trusts remain the primary vehicle for that preference, with pour-over wills acting as a safety net rather than the main engine. The overlooked detail is that a trust plan without consistent funding can create a two-track administration, with a trust administration running in parallel with probate for straggler assets. That outcome frustrates families and makes the attorney look disorganized. A disciplined funding and beneficiary review solves most of the problems.

Incapacity Planning Matters More Than Death Planning

​A sophisticated plan treats incapacity as the central operational risk. Health events occur more often than death, and they create immediate access needs. Durable financial powers of attorney, health care powers of attorney, living wills, and HIPAA authorizations should work as a coordinated set. The more meaningful work comes after signing, when the attorney and client verify that the plan will function during a real emergency. That means confirming where originals live, who has copies, how agents can access financial institutions, and whether institutions impose their own forms or notarization requirements. The trust also plays a role here, since a successor trustee can step in without court appointment if the trust defines incapacity and the process for determining it. A plan that ignores these mechanics can force a family to file for guardianship or conservatorship despite “good documents.”

Colorado Tax Planning Requires Pragmatism and Optionality

Higher-level tax planning begins with the admission that the rules change. The best plans build options rather than betting everything on one set of thresholds. For married clients, traditional credit-shelter or family-trust planning can preserve exemptions and protect assets, but it can also create administrative friction when the surviving spouse needs simplicity. Many modern plans solve this by using disclaimer-based planning and trust provisions that allow post-death flexibility. That approach keeps the plan nimble and allows the family, guided by counsel, to decide after death whether to fund a bypass structure, keep assets outright, or use a blend that fits tax exposure, creditor risk, and family dynamics.

For higher-net-worth clients, lifetime gifting, valuation planning for closely held interests, and charitable techniques may be part of the conversation. The key is matching the technique to the client’s tolerance for complexity and ongoing maintenance. A brilliant strategy that requires perfect annual execution often fails in practice. A slightly less aggressive strategy that the client will actually adhere to tends to win out over time.

Trust Design Should Anticipate Administration, Not Just Distribution

Attorneys and fiduciaries know that the distribution scheme is only half the battle. The other half is administration. A trust that reads cleanly at signing can become painful if it creates ambiguous standards, conflicting trustee powers, or unclear accounting expectations. Higher-level drafting anticipates the questions that appear in the first sixty days after death or incapacity. Who has the authority to manage real property? How do you handle digital assets and device access? What is the plan for closely held business interests? Are there clear successor trustee provisions? Does the instrument authorize tax elections and allocate tax burdens in a predictable way?

You also need to plan for interpersonal reality. Blended families, unequal gifts, or family members with addiction or disability issues require careful guardrails. In those cases, trust terms that stage distributions, authorize professional trustee involvement, and provide clear standards can reduce litigation risk and protect beneficiaries from their own vulnerabilities.

The Hidden Risk Is Misalignment Across the Whole Plan

Most estate disputes arise from a mismatch, not from a lack of paperwork. A trust says one thing, a beneficiary form says another, and the family assumes the trust controls. Retirement accounts, life insurance, and transfer-on-death registrations pass by contract. Real estate may pass by joint tenancy. Pay-on-death bank accounts may bypass everything. A higher-level practice treats beneficiary review as core legal work rather than clerical follow-up. The attorney should also verify titling for brokerage accounts, confirm the deed language, and coordinate with financial advisors to ensure the entire transfer system aligns.

The same alignment issue appears in tax planning. A formula bequest in a trust can behave unpredictably when asset values change, when the estate includes large retirement accounts, or when liquidity is tight. Careful drafting and clear funding instructions reduce the risk that a technically correct clause leads to messy administration.

A Practical Checklist for a High-Functioning Plan

This short checklist captures what separates a plan that “exists” from one that works, and keeps the process disciplined without turning it into a spreadsheet exercise.

• Confirm every major asset category and how it transfers at death, including beneficiary designations and title.
• Align fiduciary roles across documents so the named agents and trustees make sense together.
• Build post-death flexibility for married clients, given that tax and family circumstances can change.
• Document a funding plan for trust-based structures, with clear responsibility and follow-through.
• Anticipate administrative friction points, including real estate, digital access, business interests, and liquidity.

This is the work that prevents future disputes and reduces the chance that a family needs emergency court intervention.

Why Attorney-to-Attorney Collaboration Improves Outcomes

Sophisticated estate planning in Colorado often depends on coordination with other professionals. A client’s CPA may see income tax consequences that drive the distribution strategy. A financial advisor may identify beneficiary designations that undermine the plan. A business attorney may help structure succession for an entity interest that the trust will hold. When the estate planning attorney leads that coordination, clients get a plan that is internally consistent and defensible if challenged. That coordination also reduces malpractice exposure, since the record reflects an intentional process rather than a set of disconnected forms.

Contact Braverman Law Group

If you want a plan built for real administration and long-term flexibility, contact Braverman Law Group. Our team supports Boulder Estate Planning Lawyers Serving Colorado with high-level estate planning, probate, and tax-aware strategies designed to hold up under real-world complexity. To get started, contact Braverman Law Group at (303) 800-1588.

A sophisticated approach helps clients avoid unintended outcomes. Older documents drafted during lower exemption years may no longer serve their intended function. Formula-funded trusts, credit-shelter provisions, and gifting patterns designed for tax minimization must be reviewed to ensure they still align with each family’s priorities.

Understanding How the New Exemption Alters Transfer Tax Exposure

A clear exemption threshold provides the foundation for every other planning decision. The fifteen-million-dollar figure applies across the estate, gift, and generation-skipping transfer systems. Married couples who use portability often combine their exemptions to protect up to $30 million. That scale removes most Colorado estates from federal taxation, especially those composed primarily of residential real estate, marketable securities, and business holdings below the new threshold.

This shift does not mean that long-term planning fades in importance. It simply alters which risks matter most. Techniques developed when the exemption was lower sometimes introduce unnecessary administrative burden. Credit shelter trusts may divide assets in ways that complicate investment strategy or constrain access for a surviving spouse. Older gifting programs may also result in adverse income tax consequences if appreciated assets are transferred during a lifetime rather than being held for a later basis adjustment. Reviewing each structure helps identify where modernization improves efficiency.

Basis Planning Moves to the Center of Estate Strategy

Income tax considerations take on greater weight once federal transfer taxes are removed from the picture. Colorado residents frequently hold assets with meaningful appreciation. Residential property along the Front Range, equity positions accumulated during long careers, and ownership interests in closely held businesses often contain substantial unrealized gain. Preserving the opportunity to secure a step-up in basis, therefore, becomes a core objective.

A higher exemption also reframes the value of grantor trust strategies. Trusts created primarily for tax minimization may no longer yield the same benefits if the underlying assets would produce greater long-term gains through basis adjustments at death. Some families evaluate whether old transfers remain helpful or whether partial trust modifications can restore future tax flexibility. Techniques such as introducing powers of appointment, adjusting administrative provisions, or merging related trusts sometimes create improved outcomes. Each decision depends on the structure of the assets and the family’s long-term objectives.

Colorado’s Economic Landscape Creates Unique Planning Considerations

Local factors shape how federal rules apply. Real property values across Colorado continue to show long-term growth, which means that many families hold homes or investment properties with significant appreciation. Agricultural families often own land accumulated over generations. Business owners frequently operate companies, service firms, and professional practices that contain goodwill or other intangible assets. These categories of property require individualized planning because lifetime transfers may reduce the opportunity to increase basis.

A thoughtful strategy addresses these local dynamics. Some clients choose to simplify ownership by transferring appreciated property back into an estate when doing so creates a more favorable tax profile. Others maintain entity structures for operational or liability-related reasons, yet adjust internal ownership levels to accomplish generational planning without forfeiting income tax benefits. The correct approach depends on the family’s asset mix, liquidity needs, and succession plans.

Existing Irrevocable Trusts Should Be Reevaluated Under the New Regime

Many Colorado families hold irrevocable trusts created during an era when limiting estate tax exposure dominated planning. These trusts often continue to serve legitimate non-tax purposes, including governance, asset management, and creditor protection. However, others primarily addressed tax concerns that no longer apply. A comprehensive review identifies whether a particular trust continues to advance current family goals.

Several questions guide this analysis. Practitioners evaluate whether specific trust assets would generate improved income tax results if included in the grantor’s estate. They also assess whether the trust’s administration remains efficient in the modern environment. Investment strategy, fiduciary powers, and long-term distribution patterns all play a role. When adjustments appear appropriate, tools such as decanting, modification under state law, or careful restructuring may help realign the trust with the family’s contemporary priorities. Each decision must be made cautiously to avoid unintended tax results.

Lifetime Gifting Plays a More Nuanced Role When Transfer Taxes Decline

A larger exemption affects how advisors approach gifting. Prior strategies focused on reducing the value of a taxable estate, often through annual exclusion gifts, intrafamily loans, or valuation-based transfers. Those tools still hold value, yet their purpose changes. Families may continue to make gifts for reasons unrelated to tax, such as supporting younger generations or protecting assets from personal liability risks. Still, the economic analysis behind each transfer shifts once tax pressure diminishes.

Modern gifting strategy, therefore, examines the nature of each asset. Cash transfers maintain flexibility. Interest in entities may support legacy planning if they align with family governance goals. A highly appreciated property requires special caution because a lifetime transfer may prevent a future basis increase. Reviewing outstanding promissory notes from prior transactions, especially those involving grantor trusts, may help identify opportunities to improve long-term results. Practitioners should approach these adjustments with precision to preserve existing benefits while positioning clients for the new environment.

Charitable Planning Evolves Under a Higher Exemption

Colorado philanthropists also reconsider their strategy under the new exemption. Charitable lead trusts, private foundations, and testamentary gifts were once used frequently to reduce taxable estates. Those designs still support values-driven objectives, yet the tax rationale may no longer carry the same weight. Families now focus on administrative efficiency, flexibility, and long-term control rather than a driven structure.

Some clients may choose donor-advised funds to streamline philanthropy. Others may refine the mission of existing entities or simplify complex structures created in earlier decades. Reviewing how each charitable tool operates helps ensure that future giving aligns with both personal values and modern tax objectives.

Continued Importance of Coordinated Multigenerational Planning

Even with a high exemption, families benefit from coordinated planning. Colorado households often include blended families, children from prior marriages, or multigenerational ownership of properties and businesses. Governance, succession planning, and clear distribution language remain essential. Updating documents to reflect current goals ensures that the increased exemption does not lead to complacency that later causes conflict.

Estate tax exposure may shrink, but the need for structured planning does not. A cohesive design protects beneficiaries, organizes long-term administration, and supports the family’s evolving financial picture.

Speak With a Boulder Estate Planning Lawyer for Guidance

If you want a tailored strategy that accounts for the new fifteen-million-dollar exemption and Colorado’s unique planning landscape, you can schedule a free consultation with Braverman Law Group, LLC’s Boulder estate planning lawyers at (303) 800-1588 for thoughtful guidance grounded in current federal law.

Why the Exemption Will Shrink on January 1, 2026

The Tax Cuts and Jobs Act doubled the estate-tax exemption for 2018-2025. By statute, that increase sunsets at the end of next year, restoring the old $5 million base indexed for inflation. Put differently, every dollar of your estate above the new threshold could face a 40 percent federal tax unless you plan ahead. Colorado has no state estate tax, but families with property or relatives in taxing states (Washington, Oregon, Minnesota, and others) can face an even steeper bill.

Why You Shouldn’t Count on Congress

• Political football – Estate taxes polarize voters, so each party uses the exemption as a bargaining chip. One session may raise the limit; the next can reverse course.
• Budget pressure – Rising federal debt makes permanent repeal unlikely. Estate taxes raise a modest but politically convenient stream of revenue.
• History repeats – When the tax disappeared in 2010, families scrambled. It came back in 2011 with a $5 million exemption, climbed to 40 percent in 2013, and has shifted almost every time Congress changes hands.

Counting on repeal is like selling a safety net because the circus might remove the tightrope. Braverman Law Group encourages clients to assume the exemption shrinks and craft estate planning documents that pivot if lawmakers surprise us.

Couples: Build Choice into Your Trusts

Married Coloradans enjoy two exemptions—one per spouse—but only if the survivor claims both. Traditional “A-B” or bypass trusts automatically sheltered the first spouse’s exemption. Those older trusts still work, yet they can lock unnecessary assets in an inflexible bypass share if the exemption rises.

A disclaimer trust or other flexible marital trust solves the problem. Here is the simplified sequence:

1. At the first spouse’s passing, everything moves to the survivor outright.
2. Within nine months, the survivor decides how much to disclaim into a bypass trust that uses the deceased spouse’s exemption.
3. Assets the survivor keeps remain in the marital estate; assets disclaimed grow outside the taxable estate.

Because the decision happens after death, the survivor tailors the bypass amount to the exemption in force that year. If Congress unexpectedly lifts the limit to $14 million, the survivor can disclaim little or nothing. If the exemption tanks, the survivor can shelter the full allowable amount.

Advantages of a disclaimer-style plan include:

• Post-mortem flexibility—no guessing today what Congress will do tomorrow.
• Continued basis step-up for assets the survivor keeps, helping cut future capital-gains tax.
• Added creditor and remarriage protection for property inside the bypass trust.

Individuals: Blend Charitable Gifts with Heirlooms

Single clients do not get a second exemption, so planning tools differ. A taxpayer whose estate may exceed $6-7 million in 2026 can combine lifetime gifting and charitable strategies to trim the taxable balance.

• Annual exclusion gifts – You can give up to $18,000 per recipient (2024 limit) each year without touching your lifetime exemption. Shifting appreciating assets like business interests or growth-oriented funds removes future gains from your estate.
• Irrevocable life-insurance trusts (ILITs) – Holding life-insurance proceeds outside the estate provides liquidity for heirs to pay any tax owed, rather than selling illiquid property under time pressure.
• Charitable remainder trusts (CRTs) – A CRT lets you transfer low-basis stock or real estate to a trust, receive an income stream for life, and snag an immediate income-tax deduction. The present value of the remainder for charity leaves your estate at once.
• Donor-advised funds (DAFs) – A DAF delivers an up-front deduction while allowing you to direct gifts to favorite charities over years, keeping philanthropic control yet shrinking your taxable estate today.

Designing these tools now, while the exemption is high, moves appreciation beyond the reach of the 40 percent bite—even if lawmakers never touch the tax again.

The Countdown to December 31, 2025

Starting today, there are a few things you should keep in mind.

• Update asset values—include life insurance, business interests, and real-estate appreciation.
• Draft or revise trust documents—add disclaimer or flexibility clauses, formula funding, and reliable successor trustees.
• Run projection scenarios—model different exemption levels so you know how close you are to a potential tax.

Six to twelve months out,

• Obtain appraisals for hard-to-value assets such as closely held businesses or out-of-state property.
• Implement lifetime gifts or fund charitable vehicles early enough to avoid valuation disputes.

Last quarter of 2025,

• Finalize large gifts that rely on the higher exemption. The IRS has confirmed that gifts made before the sunset keep the benefit even after the exemption falls.
• Confirm trustees and agents so they can act quickly if the unexpected happens.

Common Questions

If I give assets away now and Congress keeps the high exemption, did I waste my shield?
No. A gift today uses your current exemption, which the IRS will not claw back. If lawmakers extend the larger amount, you still have whatever exemption remains for additional gifts or transfers at death.

Do flexible trusts trigger probate?
When properly funded, your trust avoids Colorado probate as effectively as any traditional revocable or bypass trust. Asset titling, not trust style, determines probate exposure.

Could Colorado adopt its own estate tax?
No bill is pending, and the legislature shows little appetite. Still, other states added estate taxes quickly when budgets tightened. A plan that works federally will usually outmaneuver a new state levy.

Next Steps: Build a Plan That Adapts as Fast as Congress Shifts

Waiting for Washington to settle the estate-tax debate hands control of your legacy to politicians who change course every election cycle. Crafting flexible trusts, strategic gifts, and charitable components now gives your family certainty regardless of who occupies Capitol Hill.

Braverman Law Group has guided Colorado families through estate-tax swings for more than two decades. Ouor Boulder estate planning lawyers design plans that let surviving spouses dial protection up or down and help individuals use charitable tools to keep more wealth where they want it. Schedule a strategy session today, and take command of your estate before the window narrows. Call (303) 800-1588 or fill out our secure contact form to get started.

What is an Estate Tax?

By definition, an estate tax is a tax levied on the net value of a decedent’s estate. The federal government imposes this tax before beneficiaries can inherit the decedent’s assets. Fortunately, the state of Colorado does not impose a state tax in addition to the federal government’s estate tax. Other states, such as Maryland, New York, and Oregon, do impose an additional estate tax.

What is the Estate Tax Exemption Amount?

In 2025, the estate tax exemption amount is $13.99 million. This amount is up from $13.62 million in 2024. For married couples, the estate tax exemption amount is $27.98 million. This means that any individual with less than $13.99 million in assets does not have to pay any estate tax. It is worth noting that this threshold amount is not just how much cash a person has upon death, but instead the value of their entire estate, including real property, investment accounts, and retirement accounts, minus any pertinent gifts.

The federal government decides how much to tax each estate based on how much more than $13.99 million the estate contains. For those with between $1 and $10,000 more than $13.99 million, the tax rate on the additional estate value is 18 percent – however, the government only taxes the amount that surpasses the threshold. For estates with $1 million more than $13.99 million, the tax rate is a whopping 40 percent. As the estate’s surplus (or its amount over $13.99 million) increases, so does the estate tax rate. 

How is the Estate Tax Exemption Expected to Change? How Can You and Your Loved Ones Prepare?

On January 1, 2026, the amount that a person can pass on at their death without the estate tax will change to a number between $6 and $7 million. There is also chatter in Congress of bringing back the “Trump tax cut,” which is what originally brought the exemption amount to $13.99 million this year. There is also talk, at least among some politicians, of removing the estate tax entirely.

But here is what is really going to happen: parties and politicians will continue to play political football. There is no way to accurately predict how the estate tax rate will evolve over time. The wise planner prepares for a variety of possible exemption amounts at their death, retaining an expert estate planning attorney to help them do that as thoroughly as possible.

For couples, an informed estate planning attorney can help you set up a trust that allows the surviving spouse to decide how much needs to be protected from the estate tax. This kind of trust can be a powerful tool for couples with high net worths, and especially with clear communication as a couple ahead of time, the trust can then help wealth pass onto future generations.

For individual people, it can be helpful to add charitable beneficiaries that will receive donations if the estate becomes taxable. This means that if the estate hits above the federal government’s threshold amount, the estate will start to give to the decedent’s charity of choice. Not only does this tool benefit the community, but it also allows the estate to avoid the federal estate tax altogether. Other tricks and tools might be available to you and your estate, depending on your personalized goals, needs, and priorities.

The Takeaway

Overall, our advice is this: do not count on any party to eliminate the estate tax. The government eliminated the tax in 2010, and unfortunately, it came roaring back the next year. While it can be tempting to plan as if the tax will be nonexistent, it is far better to plan or a variety of circumstances and work closely with an estate planning attorney to make sure you do everything in your power to protect your hard-earned assets. With the right legal team by your side, you can look out for yourself and your heirs in both the short-term and long-term future.

Do You Need a Boulder Estate Planning Attorney on Your Team?

When looking for a Boulder estate planning attorney, you should seek out a team that is experienced, informed, and trusted by the community. With so many changes in the political and legal landscape, it is crucial to stay in close contact with your estate planning attorney so that you can keep your estate plan in line and intact with our ever-changing world.

At Braverman Law Group, we always say that informed choices lead to peace of mind. Our team specializes in helping our clients make thoughtful decisions regarding their estate plans so that they (and their loved ones) can rest assured, knowing they have done everything in their power to prepare for the future. If you don’t yet have a Boulder estate planning attorney to help you navigate the estate planning process, consider our firm at Braverman Law Group. We have years of experience creating customized estate plans for our clients and their families, and we would be honored to do the same for you.

For a free, no-obligation consultation with one of the Boulder estate planning attorneys at our firm, give us a call today at (303) 800-1588. If you prefer, you can also fill out our online form to tell us about your legal issue and have a member of our team reach back out to you as soon as possible. Our firm covers estate planning, trust administration, special needs planning, Medicaid planning, and more.

What is the Gift Tax Exclusion?

The gift tax exclusion refers to an amount of money that each person can legally gift another person over the course of one year without being taxed. Typically, a large cash gift would require the giver to report the money for tax purposes, and a significant chunk of the gift would go toward a government tax. The receiver would therefore end up with less money than the giver originally intended, once the government collected its required taxes.

For 2025, IRS has announced an increase in the gift tax exclusion. In 2024, each individual could gift up to $18,000 tax-free, but in 2025, the limit is now up to $19,000. For married couples, the amount is now $38,000 per year, per recipient. This means that every married couple can transfer $38,000 to each of their children in 2025 without suffering any tax penalty.

What is the Lifetime Gift and Estate Tax Exemption?

The IRS also limits the amount of money that a taxpayer can gift over the course of his or her life. As of 2025, the lifetime gift tax exemption is $13.99 million. Any portion that an individual uses of this $13.99 million reduces the amount that the person can use for his or her estate tax (i.e., the more a person uses from their gift tax exemption, the less he or she can leave behind untaxed at his or her death).

Of note, this $13.99 million figure that the IRS released for 2025 is supposedly temporary. The US government has stated that after 2025, the exempted amount will go down to $5.49 million, with adjustments for inflation.

How Does the IRS Limit Gifts to Non-US Citizen Spouses?

Another way the IRS regulates an individual’s monetary gifts is by setting limits on how much one spouse can give their husband or wife who is not a US citizen. Typically, spouses can exchange money without incurring any tax penalties, but if one spouse is not a citizen, only the first $190,000 of gifts to the non-US citizen spouse is not included in the total amount of the couple’s taxable gifts.

This is because individuals without citizenship could be exempt from the typical US estate tax. When both individuals are citizens, any money above the spouses’ combined estate tax exemption ($13.99 million + $13.99 million, or $27.98 million) will be taxed when both spouses have died. It therefore does not matter to the IRS if the spouses exchange money back and forth, since they will both be taxed on the money at some point anyway. But if one spouse is potentially exempt from this estate tax, the non-US citizen spouse could amass wealth that the IRS is unable to tax. The IRS therefore caps gifts to non-US citizen spouses to keep people from avoiding estate taxes.

Why Do These Limits Matter?

The new figures from the IRS matter for several reasons. To start, they are important to note for clients who want to pass on their wealth as efficiently as possible, avoiding tax penalties along the way. If you can afford to give $19,000 to your child in 2025, for example, gifting this amount will help your child avoid incurring a tax on these same monetary assets when you die.

The figures also hold weight for individuals thinking about their estate plans. For those wanting to meet this $13.99 million figure, time is limited, and it is worthwhile to speak with a Boulder estate planning attorney as soon as possible to figure out how to lock in the higher figure. For those with a spouse who is not a US citizen, it is helpful to consult an attorney that can help you think through how to ensure both spouses’ long-term economic success.

It is prudent to update your estate plan after every major life event, or every three to five years if you do not experience a change in life circumstances. These 2025 IRS figures are part of the reason it is smart to make sure your estate plan is updated, so that you can account for these shifts as you make plans for the future.

Do You Need a Boulder Estate Planning Attorney by Your Side?

As the estate planning landscape continues to change, so do best practices for your estate planning process. At the Braverman Law Group, one of our focus areas is staying abreast of any changes in the law so that we can best advise our clients on how to proceed. In this day and age, it can be tempting to use the internet for fast facts or for legal advice, but from our perspective, there is no replacement for personalized, experience-based, thoughtful legal services that have your best interest in mind.

If you need a Boulder estate planning attorney by your side, consider our Boulder Valley firm. We believe that each estate plan demonstrates the testator’s love and thought and care, and we are committed to providing personalized legal counseling for our clients throughout Colorado. Our experience, empathy, and commitment to excellence give our client community peace of mind when they need it the most.

For a free, no-obligation consultation with one of the Boulder estate planning attorneys at our firm, give us a call today at (303) 800-1588. If you prefer, you can also fill out our online form to tell us about your legal issue and have a member of our team reach back out to you as soon as possible. Our firm covers estate planning, trust administration, special needs planning, Medicaid planning, and more.

How Does the IRS Calculate RMDs?

To make things simple, there are calculators you can use to figure out how much you need to withdraw from your IRA when you turn 73 years old. The calculator works by dividing your account’s year-end balance by your current year’s life expectancy factor. The IRS has what it calls a “Uniform Life Expectancy Table,” where it assigns you a life expectancy factor based on your current age. As you get older, your life expectancy goes down, so the denominator of your calculation will also go down. It follows that an older person with $100,000 in his IRA will have to withdraw more money than a younger person with $100,000 in his IRA.

There is, however, an exception to this method of calculation. The exception applies if you have a spouse that is over 10 years younger than you and that is named as the full beneficiary of your account for the whole year. In this limited scenario, the IRS uses a “Joint Life Expectancy Table” instead of a “Uniform Life Expectancy Table.” Your combined life expectancy with your spouse will be smaller, which of course means your RMD is then lower.

Of note, you can always withdraw more than the RMD requires you to withdraw. However, whatever money you do withdraw will be taxed as ordinary income, so few people decide to exercise the option to take more than necessary.

Which Accounts Require You to Take RMDs?

In general, the following types of IRAs are subject to RMDs: traditional, rollover, inherited, simplified employee pension, and savings incentive match for employees. Qualified retirement plans are also generally subject to RMDs. Roth IRAs, on the other hand, are almost always exempt from the requirement.

It is important to understand that account owners must calculate their RMD separately for each IRA account they own. After calculating this amount, though, they can withdraw the total RMD from one single account. The exception to this rule comes into play if you own a 401(k) or 457(b) plan, under which the IRS requires you to take the RMDs separately from each account.

When Does the IRA Require You to Take RMDs?

In short, you must start taking RMDs when you turn 73. This means that your deadline is December 31 in whichever year you have your 73rd birthday. You can also, however, delay the process and take your first RMD the next calendar year – as long as you take it by April 1 of that following year. Your deadline for a second RMD is December 31 of the year after you turn 73. For this second deadline, there is no option to delay.

What Happens if You Don’t Take an RMD?

The IRS imposes penalties for those that do not take their RMDs. If you miss the deadline for your RMD, you will face a 25% excise tax on your RMD withdrawals. If you correct the error quickly, however, it is possible to get this tax lowered to 10%. Either way, the penalty is harsh if you fail to abide by the IRS’s deadlines.

What Are the Options for Receiving an RMD?

You can take your RMD in the form of a lump sum or in the form of smaller payments. You can also schedule the payments to hit your bank account automatically over a period of time. If you do not want your RMD as cash, you can immediately put it in an investment account or a trust that you have set up. You might also choose to put the money in a high yield savings account or to give the money to a charitable cause. As always, with questions about this process, you should contact a wealth advisor or estate planning attorney that can help you sort through your options.

There is much more to RMDs than we have included in this blog post. RMDs are complicated, and the IRS’s rules on RMDs are frequently changing. At Braverman Law Group, we don’t recommend you try to go it alone. The tax penalties are too high, and when there is a lot at stake, you need an expert in your corner. Because RMDs change so significantly from person to person, from circumstance to circumstance, your best bet is making sure you have sound, experienced advice available to you about how to navigate this complex process.

Speak With a Boulder, Colorado Estate Planning Attorney Today

RMDs should factor into how you think about your estate plan. The IRS does not allow you to keep your IRA at its full value for the rest of your life, so how does this affect how much you will leave behind for your beneficiaries? What exactly will be left when you pass? To talk through the answers to these questions, contact the Braverman Law Group today. Our firm is committed to providing personalized counseling, clear explanations, and powerful execution. We have the experience and the strategy to get you the results you need, when you need them the most.

For a free, no-obligation consultation with one of our Boulder estate planning attorneys, give us a call today at (303) 800-1588. If you prefer, you can also fill out our online form to tell us about your legal issue and have a member of our team reach back out to you as soon as possible. We cover estate planning, trust administration, special needs planning, Medicaid planning, and more.

On today’s blog, we cover some important connections between the two industries, as well as what you can do if you feel like you need more time on your taxes. As always, this blog represents only a portion of what clients should know about the overlap between wealth management and tax-related services, and it is never a bad idea to speak with an experienced attorney that can help you navigate both worlds as seamlessly as possible.

Filing for an Extension

If you are in the process of starting to prepare your estate plan, do not hesitate to request a tax extension. During tax season, there is a common misconception that requesting an extension leads to an increased audit risk, but this is not the case. Instead, extensions can offer much-needed relief to those who are taking time to get their affairs in order. For those who will end up filing differently depending on the structure of their estate plan, it can be well worth it to ask the IRS for more time to file. Additionally, creating and finalizing an estate plan can take many months, and it is better to participate in the process thoroughly and carefully, so as not to skip any key steps in drafting your plan.

To request an extension, you will likely need to file for an extension with the IRS as soon as possible. By filing this request by April 15, you can avoid penalties that you might otherwise incur by filing your taxes past the deadline. One other option, if you have already filed your taxes, is filing an amended return, which can allow you to include information you did not have at your disposal when you originally filed.

Looking Ahead to Next Year

Additionally, you might be looking to start or change your estate plan in the coming months. If this applies to you, it is crucial that you ask your estate planning attorney about how your estate plan will affect your taxes for 2024 (to be filed in 2025). One of the most common mistakes we see in our area of law is that individuals procrastinate on gathering important documents, finalizing plans, and submitting paperwork; by getting ahead of the process now, soon after the 2023 season comes to a close, you can avoid this potentially costly error.

Considering Tax Implications for Wealth Management

It is just as important to make sure you understand how taxes could negatively affect your wealth management goals. For example, you might be taking up various trading activities as part of your attempt to grow your assets, and while initially beneficial, these activities could end up in generating a high tax bill when April comes around. Too often, we see clients who wait to think about taxes after they forge a plan for wealth accumulation and put that plan into place. Ultimately, tax implications are just one part of a wealth management strategy, and other considerations (family circumstances, short-term needs, and possible beneficiaries) are all other factors to keep in mind.

Similarly, you can think about how your charitable goals might align with a possible tax benefit. If you have money to spare, not only can it be worthwhile personally to find a cause you care about, but it can also reap rewards when you do file your taxes in April. Notably, only charitable donations over a certain amount qualify individuals for a tax benefit, so you should speak with an expert to get a handle on what this amount might be for you.

Consulting a Boulder Estate Planning Attorney

As you speak with professionals regarding either your taxes or your estate plan, we advise that you make sure the firm offering you their services is prepared to speak on both matters. Recently, we have seen an uptick in major transactions that relate to both industries, and even if your tax consultant does not have expertise on estate planning (or vice versa), he or she should be able to refer you to someone who does. While it can be daunting to have to consider both taxes and wealth accumulation at the same time, choosing qualified, experienced professionals to guide you can help you stay on track. Ultimately, estate planning and tax filing are both inherently individualized processes, and it is important to speak to a Boulder estate planning attorney to make sure you are working toward your goals and doing everything above board. By taking the time to get expert advice in the short term, you can end up saving yourself major headaches in the long term.

The Braverman Law Group: Boulder Estate Planning Attorneys Working for You

At the Braverman Law Group, we are committed to providing the personalized and client-centered representation to those that retain our services. We pride ourselves in offering clear explanations of complex issues as well as powerful execution of litigation strategies, so that we can fight diligently for our clients’ best interests. Our team handles a range of cases, including those related to estate planning, trust administration, special needs planning, and Medicaid planning. We are honored to be part of your estate planning journey every step of the way, and we are committed to making sure you have the right tools to achieve your financial goals. For your free and confidential consultation with an experienced Boulder estate planning lawyer, give our office a call today at (303) 800-1588. If you’d rather, you can also fill out our online form and have an attorney reach back out to you as soon as possible.

We always dissuade our clients from thinking this way. To state the obvious, we never know what’s around the corner. With no way of predicting the future, the best tool we have to ensure that our wishes are respected in the long-term future is making a thorough estate plan as soon as possible. Below, we detail several reasons why now is the best time to start (or continue) your estate planning journey.

Tax Exemptions in 2026

The federal government is gearing up to significantly alter how it handles certain kinds of tax exemptions. For example, did you know that the gift and estate tax exemptions will all be cut in half in 2026? The lifetime gift tax exemption was $11.58 million in 2020, increased to $12.92 million in 2023, and is now scheduled to decrease to $6 million in 2026. As for the estate tax exemption, it currently sits at $12.92 million per person. In 2026, the exemption is scheduled to decrease to roughly $7 million.

These exemptions can have major implications for those trying to pass on assets to their heirs and loved ones. This means that if you want to do more in 2024 and 2025 to pass on gifts to loved ones, 2024 is the time to put plans into action. By waiting until the end of 2025, you risk missing out on a major tax benefit that will be substantially less beneficial within the next two years.

Inflation

Inflation has been significantly affecting our clients for the past several years, and it is important to keep this in mind when estate planning. For example, because the yearly gift tax has consistently been on the rise, it might be more feasible now for you to increase your yearly gifts to your loved ones in a way that was not possible several years ago. In 2024, the yearly gift tax sits at $18,000 per individual per year or $36,000 per married couple per year. Annual gifting is one way our clients move wealth across generations over longer periods of time, benefiting both themselves and their heirs in the process.

Even if you do not consider yourself to be a high-net-worth individual, changes in inflation will affect your estate plans. Inflation affects everything from property costs to retirement plans to the values of debts that you hold. By neglecting to account for inflation in your estate plans or by not revisiting your estate plan regularly, you may be missing out on an opportunity to properly account for changes in the national and local economies.

Circumstantial Changes

The list of possible circumstantial changes in a client’s life is immeasurable. Has one of your children gotten married? Has anyone gone through a divorce (or is anyone planning on pursuing a divorce)? Has there been a recent incapacity, or is there an illness in the family? These are all things to think about – even if none of these changes have taken a toll on you and your loved ones, it is worth your while to plan as if any of these events could happen at any time. By starting your estate plan now, instead of when you are in crisis mode, you can give yourself the best chance of financially succeeding through these difficult times.

Communication with Loved Ones

Estate planning is also a great way to make sure you are talking with those who will be affected by your plans in the future. It is beneficial to make sure those that will inherit from your will, as well as those that will be responsible for executing your will, have copies of all of the relevant documents and records. Having discussions about how your assets will be distributed allows for less confusion your estate plan, which in turn allows your loved ones to execute your plans efficiently. We always encourage our clients to communicate with their loved ones early and often regarding their plans, to make sure any possible bumps in the road can be addressed before they become insurmountable hurdles.

Where Do I Start?

Estate planning can be stressful, and oftentimes, taking the first step is the hardest part. If you do not know where to begin, contact a qualified estate planning attorney to set up an initial meeting. Go to your meeting prepared with questions about how factors like inflation and tax exemptions might affect your individual circumstances. At the end of the day, everyone is different, and everyone’s estate plan will necessarily be different. By finding an attorney that can tailor your plan to your priorities, you can make sure you look out for your own interests and the interests of your loved ones in the long-term future – and what better goal could you set as we ring in 2024?

Are You in Need of a Team of Estate Planning Attorneys in Colorado?

At Braverman Law Group, we specialize in wills, trust, and estates for clients in Colorado. Our team is proud to create thoughtful, detail-oriented estate plans for those that seek our services, so that our clients can do everything in their power to set their loved one up for financial success in the future. If you would like a free and confidential consultation with a member of our team, give us a call today at 303-800-1588. You can also fill out our online form to contact us and have an attorney reach back out to you as soon as possible about your estate plans.

How Can I Use Tax Laws to Plan My Estate?

A recent Forbes article highlights several provisions in tax law that can help you with estate planning during inflation. First, take advantage of the increased lifetime gift tax exemption and generation-skipping transfer (GST) tax exemption. The lifetime gift tax exemption allows you to give away a large monetary amount in gifts throughout your lifetime without triggering taxation. The GST tax applies to inheritances that “skip” a generation (i.e., from your children to your grandchildren). The exemption allows you to set aside nontaxable gifts to benefit a grandchild, such as college tuition. In response to rising inflation, the IRS has increased the lifetime gift and GST tax exemption amounts. As a result, a higher monetary amount is now exempted from gift and GST taxes. To take advantage of these exceptions, you may consider giving a gift to your beneficiaries while they are still alive to reap the benefits of the increased exemptions.

If you are considering a gift to your beneficiaries while you are still alive, consider a gift in the form of appreciating assets such as stocks or real estate. Appreciating assets are a wise financial decision for two reasons. First, by gifting an appreciating asset while you are alive, your recipients can avoid estate and gift taxes on the asset. Second, as the asset appreciates, your recipients can take advantage of their increased value.

Finally, use a grantor retained annuity trust (GRAT) or charitable lead annuity trust (CLAT). A GRAT allows you to transfer assets to a trust and receive an annuity for a certain fixed time period. A CLAT allows you to transfer assets to a trust that pays an annuity to a charity for a fixed time period. When that time period ends, beneficiaries receive any remaining assets in either trust without paying taxes. Using these strategies, you can use inflation to your advantage and maximize the amount your beneficiaries receive.

Speak With a Boulder Estate Planning Attorney Today

Rising inflation may affect your estate planning strategy. To understand your best options, contact the Boulder, Colorado estate planning attorneys at Braverman Law Group today. Our attorneys can help you develop a gift and estate plan that takes full advantage of current tax rates. Whether you plan to form a trust or give a generous gift, we can help you maximize the amount your beneficiaries will receive. To schedule a free, no-obligation consultation with an attorney on our team, call us today at (303) 800-1588.

According to an article recently published by a financial advising trade publication, taking advantage of the deduction may not be simple for all Colorado landlords. The deduction requires landlords to own the property personally or through a business entity such as an LLC. Additionally, the properties must be managed as a “business” and not as an investment. Although the exact requirements for a property to be managed as a business are not clearly laid out, landlords who meet certain requirements laid out by the IRS can ensure that they are able to use the pass-through deduction.

The IRS has established a “safe harbor” rule that allows Colorado residents and other Americans to utilize the pass-through deduction if they keep separate books for their rental properties and can show that at least 250 hours of real estate rental services are performed on the properties each year. The 250 hours do not need to be performed personally by the taxpayer and can include services such as maintenance, cleaning, lease preparation and negotiation, advertisement, collecting and processing rent, as well as other work performed on the business.

Landlords who spend less than 250 hours per year performing work on their real estate rental business may still be entitled to claim the 20% pass-through deduction. However, such eligibility is not automatic. If a taxpayer claims the deduction without meeting the “safe harbor” requirements, they may be subject to a costly audit and possibly be required to pay back taxes if the deduction was claimed improperly. The risk of an audit causes fear and confusion among Colorado investors and business owners. Any Colorado landlord with questions about their eligibility for the 20% pass-through deduction should reach out to a qualified Colorado tax and estate attorney to choose the best course of action to reduce their tax liability.

Finding the Right Boulder Estate Planning Attorney for Help Reducing Your Tax Liabilities

If you or a loved one is looking for advice and counsel on how to best manage your estate and assets, including rental properties, the estate planning attorneys at Braverman Law Are here to help. Our qualified asset protection attorneys and certified financial planners can help you to reduce your and your heirs’ future tax burdens. Whether you have questions about recent tax law changes, or other estate planning needs, the Braverman Law Group will find the answers with you. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588

For example, the IRS announced it will raise the estate and gift tax exclusion limit in 2023. Individuals can gift up to $12.92 million to their heirs and beneficiaries, an increase from $12.06 million in 2022. Combined limits for married couples will be nearly $26 million in 2023.

Tax-free gifts also see a higher annual limit for 2023. Individuals can give away $17,000 per recipient without reducing the lifetime exclusion, a $1,000 increase from $16,000 in 2022. These adjustments are a routine part of the IRS’s annual inflation adjustments.

But act now to take advantage of these exclusions. The current gift and estate tax exemption provision will sunset in 2025 unless Congress takes action to renew it. Then, the amount will drop to the prior law’s inflation-adjusted $6.2 million. But Congress could accelerate the sunset provision even sooner than 2025—and it even attempted to do just that in the now-failed Build Back Better plan. Do not delay creating a plan to ensure your wealth is shared with your family—the tax landscape can change at any moment, and you do not want to miss out on even minor year-over-year limit increases.

Estate Tax in Colorado

Colorado is one of 38 states with no estate tax. Colorado eliminated its estate at the end of 2004 after a gradual reduction. This means that high-net-worth individuals can take advantage of the federal exclusion without considering any state taxes or restrictions. Colorado also has no inheritance or gift tax.

Estate Planning Tools

Individuals and families can use these exclusions to employ advanced estate planning tools such as traditional trusts, generation-skipping trusts, and Spousal Lifetime Access Trusts, or SLATs, which allow you to transfer assets between spouses without incurring substantial tax liabilities. These tools also allow the assets to avoid probate, which can otherwise pose a substantial headache for heirs and beneficiaries down the line. An estate planning attorney can help you determine which tools and techniques make the most sense for your unique circumstances.

Call a Colorado Estate Planning Attorney

Call a Boulder estate planning attorney today to make sure your estate plan takes the best advantage of all available tax laws—and avoids any unpleasant surprises. Braverman Law Group can help with all of your estate planning needs, including establishing trusts and planning for taxes. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.

Wealth Transfer Taxes

In addition to the more commonly known income taxes, there are three types of taxes to consider when estate planning. These types of taxes are collectively known as wealth transfer taxes and include gift taxes, estate taxes, and generation-skipping taxes. These can all be minimized or avoided through creative planning and the use of trusts.

Gift taxes are taxes paid by a person who transfers assets to another person without receiving something in return and are quite common. There are federal gift taxes that range from 18% to 40%, depending on the amount of the gift, and some states impose gift taxes as well.

Estate taxes are imposed on the estate itself when a person dies. Conversely, inheritance taxes are imposed on the person inheriting the funds. These taxes are collectively rare and are imposed federally on only very large estates—in excess of $12.06 million as of 2022—and most states do not impose these taxes.

Finally, generation-skipping transfer taxes incur when an individual or couple gives property or assets to a grandchild or great-grandchild. The exemption level is the same as that of estate and inheritance taxes or $12.06 million federally.

Probate Costs

Another area of potential expense for high-net-worth individuals is probate costs. Probate, or the legal process that begins when someone dies that includes validating and administering a will, can be expensive and time-consuming. Large estates can come with higher stakes and more disputes, further driving up the time, money, and hassle expended by your loved ones. Trusts can be utilized to keep certain assets out of probate. There are many types of trusts available, including Spousal Lifetime Access Trusts (SLATs), revocable and irrevocable living trusts, and intentionally defective grantors trusts (IDGT). A skilled attorney can help determine the best way to deploy these trusts.

Contact a Boulder Estate Planning Attorney for Assistance

If you wish to maximize the value of your estate, you need an estate planning attorney who understands your unique needs. The Boulder-area attorneys at Braverman Law Group make it their goal to help you make the choices that work best for you and your loved ones. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.

Tax Credits for Homeowners

Homeowners could get up to a 30% tax credit for installing solar panels or other renewable energy equipment, such as windmills. Costs incurred in installation from 2022 through 2032 qualify for a 30% tax credit. The credit falls in later years, dropping to 26% in 2033 and 22% in 2034. This extends a previous tax credit set to expire in 2023 and, starting in 2023, includes battery storage technology so homeowners can pair solar panels with storage.

Other home efficiency projects, such as energy-efficient windows and water heaters, also qualify for a 30% tax credit toward installation costs. The cap on these savings is $1,200 a year, though some projects can qualify for higher caps. The installations must meet certain efficiency criteria to qualify, and some specific items have individual caps. The credit also covers the cost of a home energy audit (up to $150) and an electrical panel upgrade (up to $600).

There are no income limits for these credits, but the credits are not refundable in the event a consumer does not have tax liability. The credits do carry over.

There are also rebate programs for efficiency upgrades to their homes, based on a percentage of energy usage cut. Lower-income households qualify for higher rebates. In addition, home appliances can qualify for a separate program, though the same project cannot apply to both rebate programs. State governments have to apply for grants, and the limits will vary by state.

Tax Credits for Electric Vehicles

Individuals and families who buy new energy-efficient vehicles such as electric cars, hybrids, and hydrogen fuel cell vehicles qualify for a tax credit worth up to $7,500. This credit is available through 2032. However, these tax credits only apply to those with under $300,000 joint adjusted gross income or $150,000 individual adjusted gross income. In addition, even if your income level qualifies, purchase prices are capped. If your passenger car is purchased for more than $55,000, you will not qualify. The limit for vans, SUVs, and pickup trucks is $80,000.

However, do not expect the full extent of these benefits soon. Auto companies in the United States have to adapt to supply new vehicles that will qualify for this initiative. Used versions of clean vehicles, however, qualify for the lesser of $4,000 or 30% of the sales price. The income limits are lower for this tax credit: $150,000 for married couples or $75,00 for individuals, and the sales price cannot exceed $25,000.

Colorado Estate Planning Attorney

For help figuring out how these initiatives impact your estate planning goals, contact the Boulder estate planning attorneys at the Braverman Law Group. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.

Here are some of the main areas of estate planning to review in 2021.

Tax Exclusions

The unified tax credit allows people to transfer portions of their estate without incurring federal gift or estate taxes.

For 2021, the unified tax credit is $11.7 million for individuals and $23.4 million for married couples. These figures apply to gift and estate taxes combined. In other words, use of the exemption for lifetime gifts reduces the amount of assets that can be transferred tax-free after death.

It is important to understand that this generous exemption is not intended to be permanent. Unless Congress passes legislation saying otherwise, then the current credit will apply only to tax years up to 2025. Under current law, the exclusion will be halved after 2025. For this reason, it may make sense to begin gifting assets to loved ones now rather than through a will.

In addition to the unified tax credit, it is also important to consider the annual gift tax exemption.

Each year, people can make up to a certain dollar amount of gifts without incurring the federal gift tax or dipping into the lifetime exclusion. For 2021, the annual exclusion amount for an individual is $15,000 for each gift recipient. That means that a married couple could gift $30,000 to each of their children, grandchildren, nieces, nephews, and other loved ones without incurring the federal gift tax. For some couples, taking advantage of the annual gift tax exemption is an excellent strategy to reduce their taxable estate while still preserving the lifetime exemption.

Advance Directives and Powers of Attorney

In addition to reviewing your financial planning documents, it is also prudent to review your plans periodically for end-of-life care or periods of incapacitation. Especially if you have recently experienced a significant life change—such as losing your partner or becoming ill—it may be necessary to update the legal documents that will guide your medical and financial decision-making should you become incapacitated.

Although it is best practice to review your estate plan at least annually, various pieces of legislation and the change in administration has made 2021 an especially important year to complete a year-end review. Working with an estate planning law firm can help ensure that you are making the most of your assets while protecting them in the years to come.

Consult a Colorado Estate-Planning Lawyer

As the year draws to a close, there is still time for Boulder residents to create or revise planning documents before the New Year. To help ensure your plan is optimized for 2021, contact the Braverman Law Group today. Our experienced attorneys provide advice and representation regarding Colorado estate plans, asset protection, special needs trust, and more. Whether your estate planning needs are simple or complex, we have an excellent track record of helping people like you achieve peace of mind through responsive estate planning. To schedule a free initial consultation with one of our Coloradan estate planning attorneys, call (303) 800-1588 today.

Versions of the Build Back Better bill have included provisions to trigger capital gains tax on a regular basis for assets held in trusts, upon death, and when making a gift. Congress also considered dramatically reducing the unified tax credit, which would have restricted the reach of grantor trusts as an estate-planning tool.

But the bill in its current form does not impact the estate tax system directly. Where does this leave Coloradans who have made changes to their estate plan in response to this legislation?

In general, Colorado estate holders who have begun the planning process in response to Build Back Better have little to fear. This is because the proposed legislation is still just that—a proposal. Until the bill is passed into law, no one can know whether estate tax changes will be included.

Although the bill in its current form does not include any direct estate tax changes, it is wholly possible that Congress will reincorporate some of the dramatic changes it had previously considered in order to pay for the large spending program it envisions.

In addition to the fact that the bill is still in flux, it is also worth noting that the bill in its current form still targets taxpayers with high incomes. For example, the bill contains a special tax of 5 percent on those with incomes above $10 million, along with an additional 3 percent surtax for those with incomes above $25 million. The 5 percent tax will also apply to trusts with very modest incomes.

If these provisions remain in the final version of the bill, then trusts will still need close monitoring and adjustments.

First, moving forward, it may be advantageous to allow trusts to make charitable contributions from gross income since these contributions could qualify for the charitable contribution deduction. However, this technique will only be available to trusts that explicitly permit contributions in the original language of the governing instrument. Otherwise, a viable strategy to obtain the benefit of the deduction may be to contribute trust assets to partnerships that pay charitable contributions.

Second, non-grantor trusts that may be subject to the 5 percent surtax would be wise to review their tax status before the New Year. This includes evaluating gains and incomes, the tax status of those figures, and possible distributions. Carefully calculated distributions could result in substantial savings over the long run.

Finally, when drafting trusts in the future, planners should consider strategies like including more flexible classes of beneficiaries in the governing language. Doing so would allow trusts to distribute income to beneficiaries in lower income tax brackets in order to avoid harsh surtax rates.

Despite the headlines, those with substantial estates should still be meeting with qualified professionals in order to plan appropriately for upcoming changes to federal law. Law firms specializing in estate planning can help you protect your estate for yourself and future generations.

Contact a Colorado Estate-Planning Attorney

If you are a Colorado resident with a pre-existing estate plan or wish to begin the estate planning process, contact the Braverman Law Group today to get started before the New Year. There is still time to engage in proactive planning before Congress once again may unsettle estate-planning techniques. The Braverman Law Group has an excellent track record of helping Coloradans like you plan strategically to ensure peace of mind for the future. Although our attorneys are recognized as some of the leading estate-planning attorneys in the country, we pride ourselves on individualized attention and sustained relationships with each one of our clients. To set up a free consultation, call (303) 800-1588 today.

Reduction in the Unified Credit Amount

Effective in 2022, the current proposal halves the estate and gift tax exclusion. This change essentially reverses the Tax Cuts and Jobs Act’s recent change to the exclusion and will affect Coloradans with large estates.

The estate tax exemption affects wealth transfers at the time of death by allowing the deceased person to transfer up to a certain amount of her assets without being subject to the estate tax. Similarly, the gift tax exclusion lets living people transfer up to a certain amount of money without having to pay gift tax. Both exclusions are important tools in the estate planning toolbox.

Importantly, the federal gift and estate tax exclusions operate together. The lifetime amount that someone claims on the gift exclusion reduces the total that can be claimed for the estate exclusion.

It seems likely that this portion of the tax increase proposal will remain intact. Accordingly, single and married individuals with assets greater than $6 and $12 million, respectively, as well as people whose assets may obtain those amounts over time, should seriously consider making large gifts before the end of 2021. This strategy is worthy of careful consideration since it will maximize the current exemption amount.

Crackdown on Grantor Trust Planning Strategies

In its current form, the tax proposal will restrict grantor trusts dramatically, with some of the restrictions beginning as soon as the bill is passed into law.

Grantor trusts have long been the backbone of estate planning. With a grantor trust, the income in the trust is taxed to the person who created it. One type of grantor trust—the intentionally defective grantor trust—removes any assets contributed to the trust from the estate of the person who made it. In this way, the grantor enjoys both planning benefits during her life as well as estate tax planning benefits upon her death.

Although the current language of the proposal is somewhat unclear, it seems as though intentionally defective grantor trusts will no longer be a viable strategy. These restrictions will be effective for any trusts drafted as of the bill’s enactment. Therefore, there may be only a short window of time to take advantage of this important planning tool.

The proposal also treats transfers between a grantor and a grantor trust she creates as sales. In other words, the new law would treat this type of transfer as though it occurred between the grantor and a third party. This treatment triggers capital gain while depriving the grantor of recognition of a loss. It also harms a grantor’s ability to “swap” assets of equal value, a strategy commonly employed to save taxes on high-basis assets. This second portion of restrictions will apply to amounts funded after the bill becomes law.

Elimination of Valuation Discounts for Nonbusiness Assets

The tax proposal will prohibit the use of valuation discounts for the transfer of nonbusiness assets, including passive assets like cash and marketable securities. The transfer of nonbusiness assets—like transferring a marketable securities portfolio into a family limited liability company—has long been used to reduce the value of the non-controlling entity to minimize the tax burden.

Moreover, the proposal limits the use of valuation discounts by taxpayers who purchase an entity with special features, like lack of marketability or minority ownership.

The elimination of this discount is a major change in the law that will block an estate holder’s ability to compress the value of her assets before gifting them to the next generation. Critically, this part of the proposal will take effect immediately after the spending bill becomes law. For those seeking to maximize wealth transfer to the younger generations, the time to act is now.

Colorado residents must be prepared for each of these major changes to taxation coming down the pike.

Consult a Colorado Estate-Planning Attorney to Protect Your Assets

The Braverman Law Group is watching these developments in Washington, D.C. closely in order to protect Colorado estate planning clients who will be negatively affected. If your total net worth, including life insurance benefits, exceeds $6 million, contact the Braverman Law Group while there is still time to act. Beginning next year, the forthcoming reduction in the unified credit amount will severely impact your ability to claim the gift exclusion, costing you and your family untold amounts. To schedule a free consultation with an experienced estate planning attorney, call 303- 800-1588.

This won’t be of interest to many of you, I’ll admit right up front. It’s a niche blog post. But I couldn’t ignore it because for those of you who own businesses or have children launching into the workforce, this could be great news! If you don’t offer a traditional retirement plan, until now, you’ve been at a loss, without tools to help your lowest-wage earners with retirement. Likewise, if your kids are at a first or second job, they probably aren’t being offered the full retirement package and this could help them start the retirement savings habit as soon as they start working – a great idea! Not to mention the tax savings…

The Obama administration has created a new retirement plan just for those starting out with retirement savings. It’s called the MyRA and if you blinked during the State of the Union address, you might have missed it.

It boils down to a safe, entry-level Roth IRA for people who want to invest as little as five dollars ($5.00) at a time with zero risk. It has a fixed return.

A Quick Lesson on Basis

I say it’s like a Roth-IRA because withdrawals of principal (technically, of basis) are tax-free. That distinction between principal and basis is an important one when our hypothetical investor gets into the big bad unsheltered world of retirement savings where investments go down sometimes.

If an investment goes down, and you get to withdraw principal tax-free, you just lost some of your tax-free money because your principal disappeared when your investment dropped below what you put into it.

But if you can withdraw tax-free the value of what you put in – regardless of what it is worth today – you get to withdraw your “basis”. So if your investment in Buff Brownies got cut in half but your investment in Clean Cars doubled, you can withdraw a lot of those Clean Cars gains tax-free (normally gains would be subject to tax) because you are applying the basis leftover from your investment in Buff Brownies that you can’t use against Buff Brownies because Buff Brownies’s stock dropped and the money isn’t there to withdraw.

To qualify:

• The employer must not offer a “traditional” retirement plan (Obama didn’t define “traditional” during the speech so we’ll have to see what that means in the coming months;
• The participant (kid/employee) must earn less than one hundred, ninety-one thousand dollars ($191,000) per year (Obama didn’t specify whether that was individual or family income so that we’ll have to wait and see on that too).

The participant’s first investment must be at least twenty-five dollars ($25). Subsequent investments must be at least five dollars ($5) each.

Once the MyRA totals fifteen thousand dollars ($15,000), the participant must roll it over into a private Roth IRA. It is unclear if they may then open another MyRA.

For our readers who work with and can help people who would benefit from knowing about this new plan and for those who have children who are just launching into their work careers and can benefit from having a retirement vehicle that starts them early on the path to a lifetime savings habit, I hope this has been a helpful blog article. Please share your thoughts in the comments.

Rabbit and Boa Constrictor thanks to herpcenter.com

If you’d like me to keep you up to date as this rabbit of legislation wends its way through the boa constrictor that is our nation’s capitol, please let me know in the comments why you’re interested in it – whether it’s for your own use, for your children, for sharing with friends, with employees, or for some other purpose. It’ll help me give you the most relevant information. And be sure to check “Yes” on the poll! Thanks!

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There are so many easy ways to screw up your estate plan – which can damage family relationships for life in many cases – and so few ways to make sure it’s right. I’ll share how our clients get peace of mind that their plan’s going to provide what they need and bring their family closer, not the opposite.

Not Having a Plan

In a sense, everyone does have an estate plan: state law makes this point a certainty. It simply may not be the plan that you had in mind, or that your family would have preferred.

Every state has laws of “intestacy.” Intestacy is the word for dying without a will. The laws of intestacy don’t control assets that have beneficiary designations (unless those beneficiaries have also died) so this “plan without a plan” can result in very unfair and unequal divisions of assets.

One major pitfall to be aware of in Colorado’s laws of intestacy is the treatment of the surviving spouse. Your surviving spouse will NOT inherit everything you have built together. The half that is deemed to be yours will be divided between your spouse and your next of kin.

Watch out, because this will affect you too if your spouse is the one who dies first. You don’t want to have to sell your home to pay out to your spouses’s next of kin!

Another major downside to not having a plan is that you have no provisions for how to care for you if you become incapacitated. In Colorado, that means two important things: one, your loved ones are going to have to spend a bunch of money and time begging a judge for permission to care for you and two, you are going to be kept alive, even as a hopeless vegetable with no quality of life for as long as technologically possible (and that can be a long time!).

How Forbes Got It Wrong: “It simply may not be the plan that you had in mind, or that your family would have preferred.”

I guarantee that it will not be the plan you had in mind, or that your family would have preferred. Let me list just a short sampling of the things people discover about failure-to-plan plans that they usually do not like:

~80% of people become incapacitated during their lives for some period of time.

Court Hearing

If you have no plan, all of your financials and medical information becomes part of the court (i.e. public) record so that someone (not of your choosing) can get the court’s approval to make medical and personal decisions for you (and get paid for it out of your money).

~Likewise, when you die, every single thing you own is itemized for the public record along with who is getting it, how old they are and where they live. It makes for very convenient sales target list-making for the honorable and just target list-making for the dishonorable con men and women who are known to work the probate lists.

~The amount that you can pass on free of estate tax has changed every year since 2001.

Forty percent

Yes, we have a $5M exemption now. But Obama has proposed a $3.5M exemption and what’s to stop the next proposal from returning to $1M or even $600,000? (That would mean that anything you own after the first $600,000 would be taxed at the rate of (probably) 40% due within 9 months of death.)

It’s all so avoidable!

What makes the idea of getting your estate plan done so scary for you? Take just two minutes right now and come up with three obstacles to getting your estate plan done. Then come up with the three best reasons to get it done. I’ll bet if you compare the two, the obstacles are *nothing* compared to the reasons to do it.

You know that Bennett Braverman and I are experienced in all sorts of fascinating family and asset arrangements and we can probably help you with yours too.

Best Regards, Diedre Braverman

Related Posts: Robin Williams’ Estate Plan Has Problems That Can’t Be Fixed, Estate Planning! The Cure to Unhappiness about Thick Stacks of Legal Papers!, How Forbes Got Major Errors in Estate Planning Wrong – Part II, Estate Planning Technology Develops Quickly

I visited the eye doctor today. My vision has changed a lot since I got my prescription lenses only 6 months ago. I think of optometry as a pretty unchanging area of medicine (“Is it better with one? Or two? One? Or two?”). I was surprised that they had two new tests for me today: to check the health of my areas of my eye deeper than my retina.

Your regular (annual to no-more-than-every-three-years) legal planning check up is similar to your annual eye exam. You and your attorney are searching for the changes that are particular to you (like the testing of your eye’s vision – your prescription). And you’re also looking for changes that apply to most or all patients: the new exam technologies.

Let me put this another, more graphic, way. When you leave your attorney’s office with your shiny new estate plan, all of the pieces that are particular to you are fresh and current: like fresh peaches.

And they have been baked into a pie of legal language designed to achieve your current goals within the context of the laws as they were written at that moment in time. In a way it’s a sort of snapshot. But on with our food analogy. The peaches of your particular family and assets and choices are blended with the pie crust of today’s laws including tax codes and out comes a tasty pie!

In estate planning, the annual checkup can be divided into the same two categories. The first category is the changes that are particular to you such as the financial maturity of a child that you now want to name in positions of responsibility or the birth of a grandchild whose education you want to help with.

These changes can become dramatic over time. So dramatic, in fact, that the old estate planning documents are no longer made with fresh peaches. If they had a smell, it would seem to come from these:

The second category is the changes that apply to all legal planning clients with a plan similar to yours. These changes could be the result of changing legal strategies: a creative lawyer somewhere has punched a hole into a previously solid strategy so that your lawyers must be even more creative in restructuring the plan to achieve your objectives. They could be the result of changes in applicable laws: Congress makes yet another change to the estate tax system and your lawyers must adapt your plan to take full advantage of all deductions and exemptions permitted under the new law. Or they could be the result of changing legal technology: your lawyers or someone they know have developed a new tool or technique that better achieves your objectives than what was state-of-the-art legal practice the year before. These are all changes to your pie crust.

If you add the rotten inside ingredients to outdated outside ingredients you end up with a pie no one wants:

Related Posts: Robin Williams’ Estate Plan Has Problems That Can’t Be Fixed, Estate Planning! The Cure to Unhappiness about Thick Stacks of Legal Papers!, How Forbes Got Major Errors in Estate Planning Wrong – Part II, How Forbes Got “Major Errors in Estate Planning” Wrong

Tax-free Versus Tax-deferred

Retirement Accounts – 401(k)s, (403(b)s, IRAs and others – have wonderful tax advantages. Some allow you to put pre-tax money into an account, which then grows tax-free for years or evendecades until you withdraw it. When you withdraw it, you pay tax on the withdrawal. So they aren’t “tax-free”, they’re “tax-deferred.”

Others, called Roth accounts, work differently. You put after-tax money in them (in other words, you have paid income tax and other taxes like unemployment, etc. on the income before you deposit the money into the account). The money grows tax-free. That is, you do not pay income tax each year on the gains in the account. Then, when you withdraw the money, it’s all tax-free: both the after-tax deposits you made and the gains on those after-tax deposits which you never did (and never will) pay any tax on.

These are pretty compelling reasons for putting money into Retirement Accounts.

Estate Planning with Retirement Accounts

How big can it get?

From an estate planning perspective, Retirement Accounts provide some attractive planning options. You can pass Retirement Accounts on to younger generations in ways that allow your beneficiaries to defer paying taxes on the funds in the accounts for, perhaps, decades as the inherited Retirement Accounts grow tax-free (for Roths) or tax-deferred (for non-Roths). When we’re talking about an inheritance by a prudent 20-year old or, even more securely, a trustee for a 20-year old, the inherited Retirement Account could be worth two or three or ten times its original value when inherited.

Types of Retirement Account Investments

Now, there is a question I often get that I must answer here in a way that you may not like. Unlike other kinds of accounts, most Retirement Account custodians only offer paper investments as options for investment. That leaves out entire classes of investment such as real estate, tax liens and small businesses. This article ends here if you own a 401(k) or 401(3)b and you can’t roll it over into an IRA.

If you have an IRA, or the option to rollover into an IRA, there are a few “self-directed IRA” custodians (a “custodian” is the company that holds your money and complies with IRS requirements for IRA reporting and – most importantly – gives it back to you when you want it) who will permit you to invest in any of those non-traditional classes of investment.

Protect Yourself From Danger

Caution up front makes for a safe retirement later.

A web search will turn up a few. Because they are not well-known companies, I cannot tell you about any experiences our clients have had with any of them. But please do read this warning from The North American Securities Administrators Association Self-Directed IRA Fraud. I also encourage you to check out this alert from the Securities and Exchange Commission (SEC): Self-Directed IRAs and the Risk of Fraud It’s a pretty murky area so keep a sharp eye out and tread carefully. You don’t want to lose everything because you tried for a few extra points on your return.

To maximize the tax-free or tax-deferred growth of your Retirement Accounts, please give us a call at (303) 800-1588 to schedule a no obligation consultation. We’d love to help!

Related Posts: Robin Williams’ Estate Plan Has Problems That Can’t Be Fixed, Estate Planning! The Cure to Unhappiness about Thick Stacks of Legal Papers!, How Forbes Got Major Errors in Estate Planning Wrong – Part II, How Forbes Got “Major Errors in Estate Planning” Wrong